Today’s Jobs Report Is Good News for America

Commentary By

As senior policy analyst in labor economics at The Heritage Foundation, James Sherk researches ways to promote competition and mobility in the workforce rather than erect barriers that prevent workers from getting ahead. Read his research.

Today the Bureau of Labor Statistics had encouraging news for Americans. The June jobs report contained some of the best labor market figures since the recession began. Employers added 288,000 net new jobs, and the unemployment rate fell 0.2 percentage points to 6.1 percent—the lowest since the financial crises worsened in September 2008. Unlike previous reductions in unemployment, job creation—not falling labor force participation—drove this drop.

In further good news, the ranks of the long-term unemployed dropped by 293,000—a reduction of almost 10 percent. Consequently the median and average duration of unemployment dropped to three months and eight months, respectively. Unemployed Americans now find jobs more quickly than at any point since 2008. This should cause Congress to carefully consider the wisdom of reinstating 1.5 years of unemployment insurance benefits.

The payroll survey also showed robust job growth across many industries. The professional and business services (+67,000), retail trade (+40,000), leisure and hospitality (+39,000), and healthcare and social services (+34,000) sectors showed the highest job growth. Government payrolls (+26,000) did not lag far behind. Hourly wages grew only slightly and weekly hours remained flat over the month—employers do not yet feel pressured to either raise pay significantly or increase their employee’s work hours.

In fact, part-time employment sounded the main sour note in the report. Part-time jobs accounted for all the net job growth in June. The household survey has two separate definitions of part-time jobs. One jumped by 1.1 million (+275,000 part time for economic reasons and +840,000 for non-economic reasons). The other surged by 799,000. Since the start of 2014 both these measures have trended up. And since the recession began the hours of workers in the bottom quintile have fallen and stayed low.

This could reflect the healthcare law encouraging employers to reduce workers to part-time status. Or it could reflect statistical noise—average hours did not change in the payroll survey and the household survey has a much larger margin of error. It will take more time and data to determine what caused this shift.

The overall good labor market news stands juxtaposed with the discouraging first quarter GDP report. That report found the economy shrinking at a 2.9 percent rate. This report gives hope that the GDP numbers moved anomalously and the economy is not about to slip into another recession. But labor market changes tend to lag the broader economy. After both previous recessions, unemployment did not start rising until after economic growth began decelerating. Unemployment did not peak after the 2001 recession until August 2003, and did not peak after the 2008-09 recession until October 2009—in both cases after the economic recovery had already began. If the second quarter GDP report shows continued economic contraction then this good labor market news may not last.

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